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A Coalition-chaired Senate inquiry has raised doubts about a Coalition plan to water down Labor's financial advice reform laws.
The Coalition wants to remove the catchall provision requiring financial planners to take any step that would "reasonably be regarded as being in the best interests of the client", leaving in place a six-part checklist it argues will amount to the same thing.
But the inquiry isn't certain, recommending that the government "consider closely how these separate obligations work together and whether any further strengthening is required to ensure that a provider cannot circumvent these best interests obligations".
The same committee is due to report next week on the behaviour of the Australian Securities & Investments Commission in investigating the misbehaviour of financial planners associated with the Commonwealth Bank.
Introduced in July 2013 in response to a string of high-profile financial collapses, Labor's legislation also prohibited them from obtaining commissions and other forms of conflicted remuneration.
The committee gives a cautious green light to Coalition plans to reintroduce limited commissions for bank staff selling financial products, a proposal pushed by the Commonwealth Bank in its submission to the committee. But it says the provisions of its bill should be redrafted to make it clear that what is being allowed is "conflicted remuneration" rather than commissions as widely understood.
The language in the bill's explanatory memorandum needs to be made "much sharper" when it comes to dealing with conflicted remuneration.
The report endorsed Coalition plans to remove the requirement for planners receiving pre-existing commissions to write to their clients each year telling them so.
It said: "Other avenues remained open for advisers to keep in touch with their clients".
The government is understood to want to move quickly ahead of Labor's rules becoming mandatory in July.
Before he stepped aside over an appearance before the NSW Independent Commission Against Corruption in March the then assistant treasurer Arthur Sinodinos announced plans to dilute Labor's rules by regulation, circumventing the need to get amendments to Labor's laws through Parliament. Finance Minister Senator Mathias Cormann has taken over on the issue.
Industry Super Australia has pleaded with the government not to attempt to again try to water down the rules by regulation, something possible at executive council meetings due on June 21 and June 28.
''If the government does proceed with making such regulations, it is crucial that draft regulations are released and consulted on,'' Industry Super wrote in a last-minute note to the Senate inquiry. ''It is critical that any proposed amendment to the financial advice laws ... are allowed full parliamentary scrutiny.''
A dissenting report by Labor Senators found against the Coalition's proposals and recommended the government amend the Corporations Act to restrict the use of the terms '"financial planner" and "financial adviser".
A dissenting report by Greens Senator Peter Whish-Wilson also found against the proposals recommending instead that Labor's law be reviewed after five years.
The government will announce its response to the inquiry shortly.
